Talk:Distributive efficiency

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[edit] Criticism section

Nikodemos removed the section on criticism saying in the edit summary "this is really irrelevant to the theory; obviously maximizing utility will only matter to those who care about utility." I think this section should stay in. I think the section is very relevant to the theory. The theory rests on the concept of utility, which is often used in economics but has its origins in utilitarianism. I think people often take for granted that so much of economic thought relies on this particular moral philosophy, and a little reminder is worthwhile, not just as a criticism, but as background information. Also, please leave in the Friedman reference. His article had a good short description of distributive efficiency which I used to make the article. His reference is not only connected to the criticism section.--Bkwillwm 07:02, 28 March 2006 (UTC)

[edit] Anon comments in article

Removed from article text, added here. --Thunderhead 21:05, 16 August 2006 (UTC)

--new thought-- I wonder if this theory is still valid. A person given a continuous supply of CD certificates will, after taking a few CD's that satisfy his/her own interest, will then take free CD's that can be sold on eBAY for big profits. In today's world, no one will buy CD's that they do not like. —The preceding unsigned comment was added by 208.248.33.30 (talk • contribs) .

--response to new thought-- The theory is still valid. However, the example needs some work, given the flaw you've pointed out. I remember learning it in school (more than a decade ago), something like this:

The perceived value of an item decreases for every additional quantity of the item purchased. So, if you are thirsty, you might go out and buy a bottle of water. You'd probably be willing to pay a good amount of money for that bottle. Once you finish the water, part of your thirst is quenched, and your thirst reduces. The amount you'd be ready to pay for a second bottle of water would be less than the amount you paid for the first one. Which is why a six-pack is cheaper per piece than an individual item.

Walmart has probably used this principle in its 14oz cans of soda. Apparently some research showed that the average amount of soda that people would like to consume, is 13.5oz. By selling a can with 12oz of soda, cola companies weren't working on an optimal price model, since they'd be selling 2 cans of soda (24oz) but the consumer would have a price in mind that only accounted for 2oz of the second can. If not, the consumer would probably skip buying the second can. By selling a 14oz can, you charge the optimal amount for 14oz of soda. The manufacturer can charge a fair price, and the consumer can pay a fair price. Everybody wins. Of course, this argument is probably flawed, since Walmart is all about reducing prices. But you get the drift. —The preceding unsigned comment was added by 198.45.18.28 (talk • contribs) .